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American Exceptionalism and Worker-Bashing, Adam Davidson Style

NYT/NPR economic guru Adam Davidson misrepresents the facts and appeals to American prejudices to sell worker-bashing.

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Let’s look at GDP. That’s a fundamental figure, surely beyond question or compromise. Really? Our GDP stats include something called a “ hedonic price index” basically to allow for the fact that computers are becoming more powerful at lower costs. In essence, the US grosses up the price of computers in its GDP reports to adjust for the fact that computer prices are dropping.

These adjustments are significant. The US is the only country that uses hedonic indexing. The Bundesbank complained that if they calculated GDP the way we did, their GDP growth would be 0.5% higher. And the cumulative distortion is massive. In 2005, Michael Shedlock contacted the Bureau of Economic Advisers and they supplied some dated information on hedonics (including a spreadsheet). Even so, he found that hedonic adjustment to GDP was 2.257 TRILLION dollars , or 22% of then-current GDP.

And now let’s get to the kicker. Here is how Davidson characterized the US versus Europe, at the top of his piece:

But G.D.P. per capita (an insufficient indicator, but one most economists use) in the U.S. is nearly 50 percent higher than it is in Europe. Even Europe’s best-performing large country, Germany, is about 20 percent poorer than the U.S. on a per-person basis (and both countries have roughly 15 percent of their populations living below the poverty line). While Norway and Sweden are richer than the U.S., on average, they are more comparable to wealthy American microeconomies like Washington, D.C., or parts of Connecticut — both of which are actually considerably wealthier.

The IMF reported these per capita GDP figure for 2011, per Wikipedia, in the World Economic Outlook Database-September 2011. Davidson apparently chose another source, possibly the World Bank or the CIA Factbook, which puts the US higher in the relative rankiing:

And even before you make a roughly 20% adjustment to US GDP that the hedonic indexing hocus pocus suggests might be in order.

It seems difficult to fathom how anyone could argue for squeezing labor when Europe is a living laboratory in how it simply produces a downward spiral. It was the right remedy when inflation was rampant, but that ceased being a pressing worry over two decades ago. It is now a useful canard to facilitate transfers from ordinary workers to top management, and it appears there is no shortage of propagandists like Davidson to carry the message.

Yves Smith is the founder of Naked Capitalism and the author of 'ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism.'

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